Coming off of new peaks that the industry reached during the last fiscal year—covid-19 and lockdowns be damned—July has been a bit of a downer. Cement offtake fell below 4 million tons which sets the fiscal year to a sombre start, though the likely culprit here is the monsoon season which always leads to a dip in demand and does not have too much of an impact over cumulative sales.
Mirroring domestic sales, exports also fell due to rainy season during the month compared to previous months—the share in total offtake coming down from 15-20 percent recorded during several months last year to 12 percent in Jul-21 (10% in Jun-21). The future of the industry rests on its expectations of the domestic market and as highlighted earlier, exports may ride in the backseat for a little while (“Cement: Exports riding in the backseat”, July 12, 2021) as domestic market outshines.
On the back of robust demand and growing capacity utilizations, cement prices have also begun to go up (read: “Cement prices re-emerge”, July 27, 2021) which, as a cyclical commodity is expected from cement, but does not bode too well for the construction and housing industry as nearly all commodities are witnessing a price surge. But that’s the name of the game. Inflationary pressures are either cost-push or demand-pull and it seems like, construction material manufacturers are feeling the push and pull at the same time.
Demand is forecasted to outpace previous years substantially as Naya Pakistan Housing Programs and multiple hydro power projects buy more cement. Meanwhile, coal which is a major fuel input in the production of cement is witnessing the most unrivalled of price rallies (“Coal dunnit”, Aug 6, 2021). For cement makers, cost of coal is really pressing on the nerves and they may consider moving to cheaper coal nearby (currently they buy mainly from South Africa) whilst compromising on quality.
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